Rice demand continues strong worldwide in 2008

World consumption of rice continues to rise and outpace production. The trend will continue in 2008, bringing with it a host of factors that will impact U.S. rice producers. Speaking at the recent Mid-South Farm and Gin Show in Memphis, Tenn., Carl Brothers, senior vice president of Riceland Foods, outlined the current status of the U.S. rice industry and gave a summary of key issues on the horizon.

Global ending stocks finished in December 2007 at 72 million tons, an all-time low in supply/use comparison. “If we look at these low stock numbers and the demand we're seeing around the world … it continues to be a concern,” says Brothers.

With supplies tight, heavy rice-producing countries are restricting exports, preventing rice from escaping outwards to the international market. Vietnam, Egypt and Guyana have all issued export bans, with India essentially following suit. China has switched from an export subsidy to an export tariff — a cautionary measure in an unstable environment.

“U.S. rice prices stand at $635 per ton. The Asian prices have gone up, both in Thailand and India. If you compare us with Thailand, which is our biggest competitor in Asia, they have shot up to $500 per ton. The market has moved very quickly as there continues to be recognition that things are tight.”

Brothers noted that U.S. long grain rice has seen recent trouble and production is down 316 million bushels. The carryin on long grain was 63 million bushels — down 14 percent.

However, medium grain rice promises to be a bright spot for U.S. farmers. Production at 123 million bushels was up 16 percent. The increase was mainly due to plantings in Arkansas. “Arkansas went from 106,000 acres of medium grain a year ago, to about 148,000 acres in 2007.”

Of special interest to medium grain growers — Australia has been in a continuous drought. Australia remains hopeful of planting rice this year, but questions linger about governmental allocations of water. Buyers from Australia have been in the U.S. for the past six to nine months to buy medium grain rice.

Brothers spoke bluntly about medium grain rice in the South. “It's a shame that our Southern rice doesn't fit their palate. They came and looked at our rice, but they've chosen California. We in the South need a better medium grain variety. We keep saying that to our researchers, but as of yet we haven't developed one.

“Our medium grain, if you put it together with California and make a comparison — you would choose California. I hate to get up here and say that, but it's just a fact.”

Despite Australia's snub, Southern growers may find Turkish buyers eager for medium grain. Turkey, reacting to Egypt's export ban, is looking toward the U.S. to purchase rice, but again, the South will have to compete with California.

Brothers addressed other key markets for both medium and long grain rice. Haiti, traditionally a big puller of U.S. long grain, lingers on the brink of food riots and the Haitian government is under increasing pressure. “That's one place we've got to watch closely and they've been a big player in the long grain market. It's amazing to me as I look at Haiti and the poverty there, because of how much rice they buy and how they're able to pay the high prices.”

Iraq has held off from U.S. rice for several months, waiting for lower prices, and instead bought from Thailand and Vietnam. In the next round of buying, Iraq is expected to once again focus on U.S. rice.

Saudi Arabia has become what Brothers calls “the good news story.” With India pulling rice out of the market, U.S. rice is moving back into Saudi Arabia, and the shift should continue in the near future.

GE rice persists as an obstacle in the EU, but Brothers does see positive signs developing as supply problems mount in Europe. “The EU is a whole different story with the GE issue. We did get a message that the destination of testing is no longer required in Europe. The European Union is getting themselves in a corner on GE. Something has to give in the EU. That is helping us and hopefully will continue to help us get back in that market.”

The illness of Fidel Castro and changes in leadership have brought Cuba back into view as a potential customer. Brothers is optimistic, but believes change will be slow. “Cuba would be a huge market for the United States, and it's right here on our shore.”

2008 rice plantings were another issue of focus during Brothers' session. Rice will certainly be affected by the tremendous amount of wheat and corn in the ground, as well as soaring soybean prices.

“Many farmers are telling me they are going to cut their rice acreage. Others are telling me they are going to increase their rice acreage. The best I can call it: last year plus or minus 5 percent,” says Brothers.

“It's important to us that you grow rice. Corn doesn't do very well going through a rice mill.”